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CALIX, INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Calix, Inc

Filing date:

02/21/2025

TLDR:

Calix, Inc. experienced a revenue decline in 2024 but maintains a strong cash position. Gross margins improved, but operating expenses led to an operating loss.

ELI5:

Calix, a company that helps internet providers, made less money this year. They’re still in good financial shape, but need to find ways to grow their sales again.

Accession #:

0001406666-25-000008

Published on

Analyst Summary

  • Revenue decreased significantly from $1,039.6 million in 2023 to $831.5 million in 2024, a 20% decline.
  • Gross margin improved to 54.6% in 2024 compared to 49.9% in 2023.
  • The company reported a net loss of $29.7 million in 2024 compared to a net income of $29.3 million in 2023.
  • Calix maintains a strong liquidity position with $297.1 million in cash, cash equivalents, and marketable securities as of December 31, 2024.
  • Net cash provided by operating activities increased from $56.3 million in 2023 to $68.4 million in 2024.

Opportunities and Risks

  • Dependence on third-party vendors and supply chain disruptions.
  • Cybersecurity risks and potential data breaches.
  • Intense competition and pricing pressures.
  • Dependence on capital spending patterns of BEPs.
  • Government regulations and potential changes in subsidies.

Potential Implications

Company Performance

  • Monitor key performance indicators (KPIs) related to customer acquisition, churn, and recurring revenue.
  • Assess the impact of government funding programs on Calix’s customer base.
  • Evaluate the company’s ability to manage its supply chain and mitigate cybersecurity risks.

Calix, Inc. (CALX) 2024 10-K Filing Report

Executive Summary

This report analyzes Calix, Inc.’s 2024 10-K filing. The company experienced a significant revenue decline in 2024, primarily due to shifts in customer spending patterns. While gross margins improved, operating expenses remained relatively stable, resulting in an operating loss. The company maintains a strong cash position. Overall, the report suggests a cautious outlook, pending a return to revenue growth. Recommendation: Hold.

Company Overview

Calix, Inc. (CALX) provides cloud platforms, systems, and managed services to enable broadband service providers (BEPs) to transform their businesses. The company’s platform includes Calix Cloud, Intelligent Access, and Unlimited Subscriber solutions. Calix operates in the communications equipment industry, facing competition from companies like ADTRAN, Ciena, and Nokia. The company’s strategy focuses on expanding its customer base, building its platform, and pursuing strategic relationships.

Detailed Analysis

Financial Statement Analysis

Income Statement

Revenue decreased significantly from $1,039.6 million in 2023 to $831.5 million in 2024, a 20% decline. This was attributed to reduced spending by large and medium-sized customers and delayed purchasing decisions by smaller customers. Cost of revenue also decreased, but not proportionally, leading to an improved gross margin of 54.6% in 2024 compared to 49.9% in 2023. Operating expenses remained relatively stable. The company reported a net loss of $29.7 million in 2024 compared to a net income of $29.3 million in 2023.

Key Ratios:

  • Gross Margin: 54.6% (2024) vs. 49.9% (2023)
  • Operating Margin: Negative in 2024

Balance Sheet

Calix maintains a strong liquidity position with $297.1 million in cash, cash equivalents, and marketable securities as of December 31, 2024. Accounts receivable decreased, reflecting lower sales. Inventory also decreased. The company has significant deferred tax assets. Goodwill remained unchanged.

Key Observations:

  • Strong cash position provides financial flexibility.
  • Decrease in accounts receivable aligns with lower revenue.
  • Significant deferred tax assets could provide future benefits.

Cash Flow Statement

Net cash provided by operating activities increased from $56.3 million in 2023 to $68.4 million in 2024, primarily due to changes in operating assets and liabilities. The company used cash for investing activities, mainly for purchases of marketable securities. Financing activities provided cash due to the issuance of common stock, partially offset by stock repurchases.

Key Metrics:

  • Positive cash flow from operations indicates a healthy core business.
  • Investment in marketable securities reflects a conservative approach to capital allocation.

Management’s Discussion and Analysis (MD&A) Insights

Management attributed the revenue decline to customer spending patterns and delayed purchasing decisions. They highlighted the importance of their platform, cloud, and managed service offerings. The company is focused on expanding its customer footprint and pursuing strategic relationships. Management expects research and development and sales and marketing investments to remain relatively flat in the near term.

Risk Factors

The 10-K filing outlines several risk factors, including:

  • Dependence on third-party vendors and supply chain disruptions.
  • Cybersecurity risks and potential data breaches.
  • Intense competition and pricing pressures.
  • Dependence on capital spending patterns of BEPs.
  • Government regulations and potential changes in subsidies.

Uncommon Metrics

The filing mentions the importance of customer satisfaction scores and churn rates, although specific figures are not provided. The company also highlights its efforts to assist customers in securing government funding for broadband expansion.

Conclusion and Actionable Insights

Calix faces challenges in the short term due to the revenue decline. However, the company’s strong cash position, improved gross margins, and focus on platform development provide a foundation for future growth. Investors should monitor the company’s ability to regain revenue growth and effectively manage its supply chain and cybersecurity risks.

Overall Assessment: Hold

Recommendations:

  • Monitor key performance indicators (KPIs) related to customer acquisition, churn, and recurring revenue.
  • Assess the impact of government funding programs on Calix’s customer base.
  • Evaluate the company’s ability to manage its supply chain and mitigate cybersecurity risks.

Calix, Inc. (CALX) Financial Analysis – 2024

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Ratio/Metric: Gross Profit / Revenue = $453,594 / $831,518 = 54.6%
    • Trend: 54.6% (2024) vs. 49.9% (2023). Percentage Change: (54.6 – 49.9) / 49.9 = 9.42%
    • Industry: The telecommunications equipment manufacturing industry typically sees gross profit margins ranging from 40% to 60%. Calix’s 54.6% is within this range.
  • Operating Profit Margin

    • Ratio/Metric: Operating Income (Loss) / Revenue = ($43,034) / $831,518 = -5.2%
    • Trend: -5.2% (2024) vs. 2.5% (2023). Percentage Change: (-5.2 – 2.5) / 2.5 = -308%
    • Industry: The telecommunications equipment manufacturing industry typically sees operating profit margins ranging from 5% to 15%. Calix’s -5.2% is below this range.
  • Net Profit Margin

    • Ratio/Metric: Net Income (Loss) / Revenue = ($29,747) / $831,518 = -3.6%
    • Trend: -3.6% (2024) vs. 2.8% (2023). Percentage Change: (-3.6 – 2.8) / 2.8 = -228.57%
    • Industry: The telecommunications equipment manufacturing industry typically sees net profit margins ranging from 3% to 12%. Calix’s -3.6% is below this range.
  • Return on Assets (ROA)

    • Ratio/Metric: Net Income (Loss) / Total Assets = ($29,747) / $939,267 = -3.2%
    • Trend: -3.2% (2024) vs. 3.1% (2023). Percentage Change: (-3.2 – 3.1) / 3.1 = -203.23%
    • Industry: The telecommunications equipment manufacturing industry typically sees ROA ranging from 2% to 8%. Calix’s -3.2% is below this range.
  • Return on Equity (ROE)

    • Ratio/Metric: Net Income (Loss) / Total Stockholders’ Equity = ($29,747) / $780,940 = -3.8%
    • Trend: -3.8% (2024) vs. 4.1% (2023). Percentage Change: (-3.8 – 4.1) / 4.1 = -192.68%
    • Industry: The telecommunications equipment manufacturing industry typically sees ROE ranging from 5% to 15%. Calix’s -3.8% is below this range.
  • Earnings Per Share (EPS)

    • Basic: ($0.45)
    • Diluted: ($0.45)
    • Trend: Basic EPS: ($0.45) (2024) vs. $0.44 (2023). Percentage Change: (-0.45 – 0.44) / 0.44 = -202.27%
      Diluted EPS: ($0.45) (2024) vs. $0.42 (2023). Percentage Change: (-0.45 – 0.42) / 0.42 = -207.14%
    • Industry: EPS varies widely, but negative EPS indicates underperformance.

Liquidity

  • Current Ratio

    • Ratio/Metric: Current Assets / Current Liabilities = $584,735 / $131,143 = 4.5
    • Trend: 4.5 (2024) vs. 3.2 (2023). Percentage Change: (4.5 – 3.2) / 3.2 = 40.63%
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. Calix’s 4.5 is very high, suggesting strong liquidity.
  • Quick Ratio (Acid-Test Ratio)

    • Ratio/Metric: (Current Assets – Inventory) / Current Liabilities = ($584,735 – $102,727) / $131,143 = 3.7
    • Trend: 3.7 (2024) vs. 2.5 (2023). Percentage Change: (3.7 – 2.5) / 2.5 = 48%
    • Industry: A quick ratio above 1.0 is generally considered healthy. Calix’s 3.7 indicates good short-term liquidity.
  • Cash Ratio

    • Ratio/Metric: (Cash & Cash Equivalents + Marketable Securities) / Current Liabilities = ($43,162 + $253,929) / $131,143 = 2.3
    • Trend: 2.3 (2024) vs. 1.7 (2023). Percentage Change: (2.3 – 1.7) / 1.7 = 35.29%
    • Industry: A cash ratio of 1.0 or higher is considered ideal, but this varies by industry. Calix’s 2.3 indicates a strong ability to cover current liabilities with cash and near-cash assets.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Ratio/Metric: Total Liabilities / Total Stockholders’ Equity = $158,327 / $780,940 = 0.20
    • Trend: 0.20 (2024) vs. 0.31 (2023). Percentage Change: (0.20 – 0.31) / 0.31 = -35.48%
    • Industry: A debt-to-equity ratio of 1.0 or lower is generally considered healthy. Calix’s 0.20 indicates low leverage.
  • Debt-to-Assets Ratio

    • Ratio/Metric: Total Liabilities / Total Assets = $158,327 / $939,267 = 0.17
    • Trend: 0.17 (2024) vs. 0.24 (2023). Percentage Change: (0.17 – 0.24) / 0.24 = -29.17%
    • Industry: A debt-to-assets ratio below 0.5 is generally considered healthy. Calix’s 0.17 indicates low leverage.
  • Interest Coverage Ratio (Times Interest Earned)

    • Ratio/Metric: Operating Income (Loss) / Interest Expense = ($43,034) / -$12,343 = 3.49
    • Trend: 3.49 (2024) vs. 2.63 (2023). Percentage Change: (3.49 – 2.63) / 2.63 = 32.69%
    • Industry: An interest coverage ratio above 1.5 is generally considered safe. Calix’s 3.49 indicates a good ability to cover interest expenses.

Activity/Efficiency

  • Inventory Turnover

    • Ratio/Metric: Cost of Revenue / Average Inventory = $377,924 / (($102,727 + $132,985) / 2) = 3.2
    • Trend: 3.2 (2024) vs. 3.9 (2023). Percentage Change: (3.2 – 3.9) / 3.9 = -17.95%
    • Industry: Inventory turnover varies widely by industry. A lower turnover could indicate slower sales or excess inventory.
  • Days Sales Outstanding (DSO)

    • Ratio/Metric: (Accounts Receivable / Revenue) * 365 = ($79,321 / $831,518) * 365 = 34.8 days
    • Trend: 34.8 days (2024) vs. 44.2 days (2023). Percentage Change: (34.8 – 44.2) / 44.2 = -21.27%
    • Industry: DSO varies by industry and customer payment terms. A lower DSO indicates faster collection of receivables.
  • Days Payable Outstanding (DPO)

    • Ratio/Metric: (Accounts Payable / Cost of Revenue) * 365 = ($20,226 / $377,924) * 365 = 19.5 days
    • Trend: 19.5 days (2024) vs. 24.3 days (2023). Percentage Change: (19.5 – 24.3) / 24.3 = -19.75%
    • Industry: DPO varies by industry and supplier payment terms. A higher DPO indicates the company is taking longer to pay its suppliers.
  • Asset Turnover

    • Ratio/Metric: Revenue / Total Assets = $831,518 / $939,267 = 0.89
    • Trend: 0.89 (2024) vs. 1.10 (2023). Percentage Change: (0.89 – 1.10) / 1.10 = -19.09%
    • Industry: Asset turnover varies by industry. A higher turnover indicates the company is efficiently using its assets to generate revenue.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Ratio/Metric: Stock Price / EPS = $38.73 / (-$0.45) = -86.07
    • Trend: N/A
    • Industry: A negative P/E ratio is not meaningful and indicates the company has negative earnings.
  • Price-to-Book Ratio (P/B)

    • Ratio/Metric: Market Cap / Book Value of Equity = (66,434 * $38.73) / $780,940 = 3.3
    • Trend: N/A
    • Industry: P/B ratios vary by industry. A P/B ratio above 1.0 suggests the market values the company more than its book value.
  • Price-to-Sales Ratio (P/S)

    • Ratio/Metric: Market Cap / Revenue = (66,434 * $38.73) / $831,518 = 3.1
    • Trend: N/A
    • Industry: P/S ratios vary by industry. A lower P/S ratio may indicate undervaluation.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Ratio/Metric: (Market Cap + Total Debt – Cash) / EBITDA = ((66,434 * $38.73) + $0 – $43,162) / (-$43,034 + $19,550) = -219.7
    • Trend: N/A
    • Industry: EV/EBITDA ratios vary by industry. A negative EV/EBITDA is not meaningful and indicates negative EBITDA.

Growth Rates

  • Revenue Growth

    • Ratio/Metric: (Current Revenue – Previous Revenue) / Previous Revenue = ($831,518 – $1,039,593) / $1,039,593 = -20%
    • Trend: N/A
    • Industry: N/A
  • Net Income Growth

    • Ratio/Metric: (Current Net Income – Previous Net Income) / Previous Net Income = (-$29,747 – $29,325) / $29,325 = -201.58%
    • Trend: N/A
    • Industry: N/A
  • EPS Growth

    • Ratio/Metric: (Current EPS – Previous EPS) / Previous EPS = (-$0.45 – $0.44) / $0.44 = -202.27%
    • Trend: N/A
    • Industry: N/A

Other Relevant Metrics

  • Share Repurchase Program: Calix repurchased 228 shares in November 2024 at an average price of $30.52, with approximately $102,910 remaining authorized for future repurchases. This indicates a continued, albeit small, effort to return value to shareholders.
  • Geographic Revenue Concentration: Calix derives a significant portion of its revenue from the United States (84% in 2024). This concentration exposes the company to risks associated with the U.S. market, such as economic downturns or regulatory changes.
  • Non-GAAP Metrics: The filing refers to “Adjusted” figures for cost of revenue and operating expenses in the segment reporting. These adjustments likely exclude items like stock-based compensation or amortization of intangibles. While these metrics can provide insights into core operational performance, it’s crucial to understand the specific adjustments made and their potential impact on the overall financial picture.

2. Commentary

Calix’s financial performance in 2024 reveals a mixed picture. While the company demonstrates strong liquidity and low leverage, profitability metrics have declined significantly, resulting in a net loss. Revenue decreased by 20%, contributing to the negative earnings. The increase in gross profit margin is a positive sign, but it was not enough to offset the decline in revenue and increased operating expenses as a percentage of revenue.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️